JPMorgan Chase & Co and Its Viability in Investing - Essay Example

Investment Report: JPMorgan Chase & Co Introduction JPMorgan Chase & Co is a monetary holding company, incorporated in on October 28, 1968. The company operates within the financial industry, and today, it prides itself in the achievement that it is among the front companies in its industry. Since its inception and later the incorporation, the company runs a successful business operation, a factor that earned it the vast market coverage it has today. The company leads in its operations, in various investment procedures, as it establishes itself in the market. Thus, this report evaluates the company and analyses its operations, strategies and financial abilities in the market. This will give the investors and interested buyers of shares the platform to take conclusive decisions about the company and its viability in investing. Executive summary Jamie Demon is the current Chief Executive Officer of JPMorgan Chase & Co and operates alongside the Board of Governors and managers of the various components of the business establishment. The company is a front global financial firm and a banking institution in both the United States and across the globe. JPMorgan Chase & Co has a global coverage with operations in various countries (J.P. Morgan Chase & Co. 2014). The main operations of the company engage in the activities of investment banking, money-making banking, and small businesses, financial services for consumers, asset management, and financial transaction processing and private equity. Thus, in view of its areas of coverage in offering services, it encompasses all the essential sectors involved in the financial industry business. The company has several principle subsidiaries, which enlist as most of the leading operational banks. The company subsidiaries include the JPMorgan Chase Bank, the National Association JPMorgan Chase Bank, Chase Bank USA and National Association Chase Bank USA. It also has a national bank, which the company uses for facilitating and giving its credit cards and other national bank branches in the United States with 23 branches. The company also has other operational units, which are non-bank subsidiaries. The non-subsidiary unit includes J.P. Morgan Securities LLC, which is operational within the United States and in foreign markets. The bank and non-bank ancillaries of JPMorgan Chase & Co operate both within the country that is the United States and traversing the globe, through all its oversee branches. In addition to having oversees branches, the company also employs the use of representative office, which help in marketing and facilitating the availability of its services to the people in the place of location of that office. The company also has subsidiary foreign banks, with which it uses as partners and operational units of the business. The core operations of the company are in four different business segments and Corporate/Private Equity segments. The consumer business of the company entails the Consumer and Community Banking segment. The part of the wholesale business consists of the Corporate and Investment Banking, the Commercial Banking and Asset Management sections. Additionally, the company also recently acquired a minority state in the Chi-X Global Holdings LLC, which remains undisclosed in their worth (J.P. Morgan Chase & Co. 2014). These core areas of the company elaborately depict the image of the operation of JPMorgan Chase & Co. it remains among the leading operational financial investing companies due to its ability to organize its operations and invest widely in various sectors, thus, earning the confidence of many customers and consumers, as well as, raising its worth in both interest and revenue. The consumer and Community Banking is the entity of the company that serves the consumers and businesses. This segment serves these customers through providing and facilitating services at the bank branches and all other services of personal banking needs such as the Automated Teller Machines services. The segment also facilitates services of online mobile and telephone banking. The segment has the units of Consumer and Business banking, Mortgage Banking that entails mortgage production and servicing as well as real estate portfolios. The Consumer and Banking services include, deposit and investment services, lending and payment solutions to people and small businesses. The Card, Merchant Services and Auto Card facilitate credit cards to consumers and some small businesses. They also provide services of payment to clients within the corporate and public sectors. The segment also provides services to merchants for payment processing as well as auto loans and student loan services to consumers. The Corporate and Investment Bank offer a suite of services. This suite consists of services encompassing investment banking, market making, prime brokerage and treasury as well as securities products. The section facilitates these services to all the global based clients, corporations, investors, other financial institutions, governments and municipalities among other entities. The company uses this segment to facilitate services and products to consumers in all the major capital markets (J.P. Morgan Chase & Co. 2014). It also facilitates services of advising on the process of corporate strategy, structure, capital raising and debt management, as well as, the origination and syndication of loans. The market and investor services facilitate the consumers in operating in securities, derivative instruments, and facilitate services on risk management, prime brokerage and market research. The company facilitates these services to consumers at their designated rates, which makes it among the favorites within the financial industry. The Commercial Banking section of JPMorgan Chase & Co provides several essential services to its consumers. These range from the facilitation of industry knowledge, and services to multinational clients both in United States and across the globe, including, corporations, municipalities, financial institutions and non-profit making entities that have an annual revenue ranging between $20 million and $2 billion (J.P. Morgan Chase & Co. 2014). The Commercial Banking also facilitates services of financing to real estate investors, financial solutions to both domestic and international clients, for their treasury, investment and asset management needs. Moreover, it also entails the Community Development Banking segment, in which it also deposits significantly in helping and developing the community within its confines of operation. The last segment of operation of JPMorgan Chase & Co is the Asset Management section, in which it has a vast continuum of clients. These clients incorporate, institutions, people with high net worth, and retail investors. The Asset Management offers management of investment services across all classes of its clients, including equities, fixed income and money markets (J.P. Morgan Chase & Co. 2014). To the individual investors, the company segment offers retirement products and services. The brokerage and banking services in this segment include trusts, estates, loans, deposits and mortgages. The clients in this segment of the banking include families, ultra high worth people, money managers’ small corporations and business owners. The services of the company in this segment, including the asset liability management, management and active budgeting of risks, pension analytics, which it facilitates to corporate and public institutions earn it the recognition and position it holds in the world rankings. The company has its strength in the core business controls within which it operates. These controls include procedures and policies defining its conduct and its objectives in the market. It also has a significantly staunch data integrity, staffing and employee training services, management of its fees and reporting structures. With these control structures, the company continues to thrive within its operations making it endeavor in succeeding within the financial industry. Corporate strategy JPMorgan Chase & Co remains among the leading operating financial foundations both in the United States and across the universe. The competitors continue seeking the secret constituting the milestones of achievements the company is making without success. The company drives its strategic operations from its mission, which entails providing and maintaining the highest uninterrupted services to its clients and customers. This commitment explains the establishment of several segments, which all seek to meet the needs of the consumers (J.P. Morgan Chase & Co. 2014). In this endeavor, the company continues to develop rigorous programs, to facilitate and provide the services the company aims to provide to the consumers. Additional, the company recognizes the need for committing to the legal and regulatory obligations as the industry dictates. The company operates within varied jurisdictions, which means that it essential to operate within and maintain the highest standards of legal and regulatory resiliency in the daily practices. The company has a Global Resiliency and Crisis Management program, whose core design is to provide integrated firm resilience that aligns with the business strategy and principles. This adds to the principles, requirements and expectations of the customers and clients globally. The program aids the company in its strategic operations by ensuring that there is continuity of the services offered to customers and clients while ensuring that it protects its employees and assets. Secondly, the program ensures that they engage the senior management in all operations of the firm, determining and managing the resiliency and risk appetite in the industry. It also helps involves the senior management in the strategy, leadership and operations oversight, making the company operate within the confines of its policies (J.P. Morgan Chase & Co. 2014). The program also facilitates legal, regulatory and compliance globally within its operations. The program also helps in developing plans based on critical analysis of the industry, helping in constructing and instituting services that meet the needs of the clients and customers. This way, the company gains the excellent market reception in the industry. Moreover, it also helps the employees to understand their role and undertake validation tests to facilitate the critical functions in the company and its operations. The program receives review and approval from the Audit Committee of the Directors Board of JPMorgan Chase & Co on an annual basis. Moreover, the company reviews the events and procedures of the operations of the company. The company also ensures annual analyses of its operations and finances to determine the resiliency of the plans in the market. JPMorgan Chase & Co over the years continues to establish leading franchise, a factor that helps it significantly in achieving the top ranking in revenue. The company also announced recently and reaffirmed its commitment to its traditional banking activities. It continues to trade in its holdings and commodities and assets as well as its physical trading operations. The firm has global financial services and assets worth over $2.4 trillion across the universe. Additionally, it also has 180,000 outstanding shares, worth over $1.8 billion (J.P. Morgan Chase & Co. 2014). The net income of the company reported in 2012 was $21.3 billion, up from the $ 19 billion of the previous year. The net income within the first quarter of 2013 was $5.7 billion, which is higher than the previous year’s first quarter, which was $3.7 billion. The increase in revenue rose by 10 percent, a factor that shows the trend in its operations and gains. JPMorgan Chase & Co is on the rise and seems that nothing can stop it from maintaining the top rank in the industry. Thus, investors should seek to establish working relations with JPMorgan Chase & Co to share in its success and services. SWAT analysis Strengths The success of JPMorgan Chase & Co originates from the understanding that the best place to be at all times is home. Thus, it enjoys a strong presence domestically as well as globally. This makes it lead among its competitors. Secondly, it has a strong retail-banking network, which helps in the accumulation of a wide customer and client base, propelling it to greater successes. Additionally, the company has diverse financial products. This factor of having the diverse financial products helps it to gunner greater market share, in addition to the financial gains, ranking it top in its class. Lastly, JPMorgan Chase & Co has a solid balance sheet, which facilitates the management with resources to maintain the company in the top rank. Weaknesses JPMorgan Chase & Co", like many others in the industry, suffers weakness from the high attrition rates in the industry. Secondly, the company is too professional, a factor which to some extent is strength, but on the negative side, it is a weakness. The professionalism level of the company may discourage investors, consumers, and clients as they may want subsidized services, which the company may not facilitate. Lastly, the bad mortgages cause dent to the reputation of the company. Threats The company operates within an industry with multitudes of challenges. The company suffers the following threats to its operations and success. The threats include, the credit market crisis, which threaten the success of the financial segment of the company (J.P. Morgan Chase & Co. 2014). The housing and mortgage crisis continue causing losses to the company, with the decline in asset and mortgage investments within the market. Additionally, the company faces stiff and the sharp rise in interest rates, which affects its relations with clients and customers. The credit card write offs also threaten the company operations, as well as the government interventions which gag the operations of the company. Opportunities The company has operational opportunities with which it can continue probing the market as a leader in the industry. Among the opportunities available include, international expansion, in which it will continue growing its strong international presence. The emerging markets also provide more opportunities or company to expand its operations. It can engage the cross selling opportunities, considering that it has many, operational business, entities (J.P. Morgan Chase & Co. 2014). The company can also engage the bailout money, which is significantly helpful for companies in expanding its operations and gaining higher returns. Lastly, from the increased economic challenges, and with its current economic status, the company has the opportunity to grow further as the competition is reducing. Trends and forces affecting JPMorgan Chase & Co JPMorgan Chase & Co focuses on the market in the United States, and the changing spending habits of the Americans are affecting its credit card business. Thus, beyond this credit card segment, the company relies on a strong economic performance, propelling it towards its top ranking. The rising interest rate increases the borrowing cost rate for the lenders. This, in turn, dampens the demand for mortgages. Thus, to combat this, JPMorgan Chase & Co can adopt to raise the rate of charges to maintain the high profit margin. However, this will cause the demand rate to fall, in contrast to low rate charge, which would increase the demand volume. The regulations by the government continue to affect the financial industry. For instance, the Base III rule will cause the banks to increase their holding amount on liabilities, which will prevent the banks from achieving the high profit margins, hence suffering losses (J.P. Morgan Chase & Co. 2014). Lastly, the competition within the market as a force affects the operations of the company. The key competitors of JPMorgan Chase & Co include Bank of America, Citigroup, Wells Fargo, American Express Company, Gold Sachs Group and Morgan Stanley all, which competes within the various segments of operation as JPMorgan Chase & Co. this competition, forces the company to seek plans and strategies to keep it at the top ranking. Nonetheless, it remains among the top ranking companies within its industry of operation. Recommendation The findings of this report depict the company as having several opportunities within which it can capitalize to maintain its performance. The program evaluating the plans of the company, its gains and establishments, is the first step towards building a stronger firm. In investing, the company has several opportunities, including the expansion into growing markets. The emerging markets provide the escapade to the increasing forces such as credit prices and competition (J.P. Morgan Chase & Co. 2014). Thus, within these confines, the company can establish itself as a giant within the financial industry. Thus, as an investment entity, the investors looking to establish relations with JPMorgan Chase & Co, it remains a viable opportunity, with assurance of success in the profit gains and revenue incomes. Conclusion JPMorgan Chase & Co as a leading firm within the finance industry, it has a brand name worth keeping in association. It operates within a cross section of businesses, which enables it vast market coverage. The strengths of the firm keep the company in its effort in maintaining the high products at low costs. The company continues to espouse the most modern technologies in its endeavor to accurately create forecast of the future trends; in addition to, strategically position and equip itself towards combating the coming future threats and opportunities. Annual Financials for JPMorgan Chase Assets Fiscal year is January-December. All values USD millions. 2009 2010 2011 2012 2013 5-year trend Total Cash & Due from Banks 26.21B 27.57B 59.6B 53.72B 39.77B Cash & Due from Banks Growth - 5.19% 116.21% -9.86% -25.97% Investments - Total 1.15T 1.18T 1.27T 1.36T 1.4T Trading Account Securities 411.13B 489.89B 443.96B 450.03B 374.66B Federal Funds Sold & Securities Purchased 195.4B 222.55B 235.31B 296.3B 248.12B Federal Funds Sold 76M 252M 314M 883M 248.12B Securities Bought Under Resale Agreement 195.33B 222.3B 235B 295.41B - Treasury Securities 30B 11.35B 8.35B 12.13B - Federal Agency Securities - - - - - State & Municipal Securities 6.54B 11.56B 16.54B 21.71B - Mortgage Backed Securities 187.29B 174.85B 185.89B 227.1B - Other Securities 256.2B 242.16B 296.47B 229.23B - Other Investments 68.11B 27.13B 87.91B 126.22B 316.05B Investments Growth - 2.15% 8.05% 6.93% 3.05% Net Loans 596.98B 655.21B 693.49B 707.45B 722.15B Gross Loans - Net of Unearned Income 628.58B 687.47B 721.09B 729.39B 738.42B Commercial & Industrial Loans 51.11B 50.91B 65.96B 161.39B - Consumer & Installment Loans 286.15B 331.01B 312B 420.61B 738.42B Real Estate Mortgage Loans 198.1B 186.02B 181.94B 61.13B - Lease Financing Loans - 0 0 - - Foreign Loans 55.09B 68.16B 95.98B - - Broker & Financial Institution Loans 13.56B 12.12B 8.49B - - Unspecified/Other Loans 25.97B 41.15B 59.44B 86.26B - Unearned Income (1.4B) (1.9B) (2.7B) - - Loan Loss Allowances (Reserves) (31.6B) (32.27B) (27.61B) (21.94B) (16.26B) Customer Liability on Acceptances - 0 - - - Loans - 1 Yr Growth Rate - 9.75% 5.84% 2.01% 2.08% Loans (Total) / Total Deposits - - - - - Loans (Total) / Total Assets - - - - - Net Property, Plant & Equipment 11.12B 13.36B 14.04B 14.52B 14.89B Other Assets (Including Intangibles) 163.01B 155.51B 147.97B 147.53B 169.41B Other Assets 94.5B 88.97B 89.36B 89.5B 110.1B Intangible Assets 68.51B 66.54B 58.62B 58.02B 59.31B Interest Receivables 67.43B 70.15B 61.48B 60.93B 65.16B Total Assets 2.03T 2.12T 2.28T 2.38T 2.42T Assets - Total Growth - 4.21% 7.60% 4.33% 1.62% Return On Average Assets - - - - 0.73% NA Liabilities & Shareholders Equity 2009 2010 2011 2012 2013 5-year trend Total Deposits 938.37B 930.37B 1.13T 1.19T 1.29T Demand Deposits 204B 228.56B 346.67B 434.3B - Savings/Time Deposits 439.1B 455.24B 504.86B 498.13B - Foreign Office Deposits 295.26B 246.58B 276.27B 261.17B - Deposits Growth - -0.85% 21.22% 5.83% 7.89% Total Debt 625.27B 616.99B 543.85B 571.13B 534.89B ST Debt & Current Portion LT Debt 368.18B 415.09B 314.21B 353.44B 239.01B Current Portion of Long Term Debt 37.08B 75.05B 62.53B 31.34B - Short Term Debt 331.1B 340.04B 251.68B 322.11B 239.01B Long-Term Debt 257.09B 201.9B 229.64B 217.69B 295.88B LT Debt excl. Capitalized Leases 257.09B 201.9B 229.64B 217.69B 295.88B Capitalized Lease Obligations 0 0 0 0 - Long Term Debt Growth - -21.47% 13.74% -5.20% 35.92% Total Debt / Total Assets 30.77% 29.14% 23.87% 24.03% 22.14% Other Liabilities 302.99B 394.15B 410.57B 390.35B 381.85B Other Liabilities (excl. Deferred Income) 302.99B 394.15B 410.57B 390.35B 381.85B Total Liabilities 1.87T 1.94T 2.1T 2.17T 2.2T Preferred Stock (Carrying Value) 8.15B 7.8B 7.8B 9.06B 11.16B Redeemable Preferred Stock 0 0 0 0 - Non-Redeemable Preferred Stock 8.15B 7.8B 7.8B 9.06B 11.16B Common Equity (Total) 157.21B 168.31B 175.77B 195.01B 200.02B Common Stock Par/Carry Value 4.11B 4.11B 4.11B 4.11B 4.11B Additional Paid-In Capital/Capital Surplus 97.98B 97.42B 95.6B 94.6B 93.83B Retained Earnings 62.48B 74B 88.32B 104.22B 115.76B ESOP Debt Guarantee 0 0 0 0 - Cumulative Translation Adjustment/Unrealized For. Exch. Gain 165M 459M 25M 25M - Unrealized Gain/Loss Marketable Securities 2.03B 2.5B 3.57B 6.87B 1.2B Revaluation Reserves 0 0 0 0 - Other Appropriated Reserves (2.29B) (1.96B) (2.65B) (2.79B) (21M) Treasury Stock (7.26B) (8.21B) (13.19B) (12.02B) (14.85B) Common Equity / Total Assets 7.74% 7.95% 7.71% 8.20% 8.28% Total Shareholders Equity 165.37B 176.11B 183.57B 204.07B 211.18B Total Shareholders Equity / Total Assets 8.14% 8.32% 8.06% 8.58% 8.74% Return On Average Total Equity - - - - 8.38% NA Accumulated Minority Interest 0 0 0 - - Total Equity 165.37B 176.11B 183.57B 204.07B 211.18B Liabilities & Shareholders Equity 2.03T 2.12T 2.28T 2.38T 2.42T Investment charts Reference J.P. Morgan Chase & Co. (2014). Retrieved fromhttp://www.jpmorganchase.com/ Read More